US & Canada Archives - Page 79 of 174

June 27, 2014

US inflation: Will the recent uptrend persist?

From Elliot Clarke at Westpac:

…it seems as though these price movements have not been driven by demand. This is particularly true for food services, which has seen growth in consumption volumes fall from 5.3% in November to –0.6% in May. Housing and utility demand has remained highly volatile, but there was no evidence of a ‘break out’ move in this component of personal consumption in early 2014, and growth has since slumped back to 0.2%. This is not to say that rents have not contributed materially to the level of housing inflation in recent years; more below.

This then points to an exogenous shock being to blame for the recent jump. Further, the coincident nature of the inflation uptrends for food and housing services alludes to a common cause: the cost of energy. The 6.1% gain in total PCE energy prices from April 2013 to May 2014 corroborates this belief. To the extent that shifts in energy costs typically prove temporary, this inflationary impulse will likely dissipate in coming months – leaving aside current geopolitical concerns.

June 26, 2014

The tragic record of American policy in the Middle East | BillMoyers.com

Investigative journalist Charles Lewis, author of 935 Lies: The Future of Truth and the Decline of America’s Moral Integrity tells Bill Moyer:

An outrageous thing happened. We lost $2 trillion. More than 100,000 people died. Folks are going to be maimed for life in the tens of thousands… And no one has ever acknowledged that this [Iraq] was a war on a lark. It was a complete war of choice, because a certain little faction wanted to do it and they orchestrated it… Did they make statements that weren’t true? The answer is yes…

A complicit partner, he says, is a media “intent on preserving the status quo …and never offending the ruling elite”.

Washington Post’s Walter Pincus:

More and more the media become, I think, common carriers of administration statements and critics of the administration….We’ve sort of given up being independent on our own.

June 23, 2014

Andrew Bacevich: The End of American Exceptionalism | BillMoyers.com

Extended Interview: Andrew Bacevich
June 20, 2014

After the broadcast interview, Bill continued his conversation with military historian Andrew Bacevich about what America should do in the Middle East.

Bacevich draws parallels between the current Iraqi crisis and the Vietnam War, discusses our evolving relationship with Iran and challenges neoconservatives for their take on US foreign policy.

“My reading [of history] is of course there is evil in the world that needs to be taken into account and some time must be confronted,” Bacevich tells Moyers. “But let’s not kid ourselves: In somehow imagining that the United States represents all that is good and virtuous, we, ourselves, have committed many sins. And we ought to be cognizant of those sins before we go pronouncing about how the world ought to be run.”

Producer: Gina Kim. Segment Producer: Robert Booth. Editor: Sikay Tang.

June 23, 2014

Fedex brings a warm glow

Summary:

Bellwether transport stock Fedex completes a cup-and-handle continuation pattern.
The Dow continues its strong up-trend.

Bellwether transport stock Fedex completed a strong cup and handle continuation pattern, offering a target of 160*. Recovery of 13-week Twiggs Money Flow above zero and the descending trendline indicates medium-term buying pressure. Breakout brings a warm glow as I find Fedex one of the most reliable indicators of overall market direction — as in November 2007.

Fedex

* Target calculation: 145 + ( 145 – 130 ) = 160

Dow Jones Industrial Average is testing medium-term resistance at 17000. Breakout is likely and would signal an advance to 17500*. Recovery of 13-week Twiggs Money Flow above the descending trendline would indicate medium-term buying pressure. Reversal below 16750 is unlikely, but would warn of a correction.

Dow Jones Industrial Average

* Target calculation: 16500 + ( 16500 – 15500 ) = 17500

June 23, 2014

Canada: TSX 60 marches on

Canada’s TSX 60 marches on towards its target of the 2008 high at 900. Rising troughs on 13-week Twiggs Money Flow signal strong buying pressure. Reversal below support at 845 is unlikely.

TSX 60

June 22, 2014

Why US hard power failed in Iraq and elsewhere | Bill Moyers

Outstanding. Military historian Andrew Bacevich sums up the stupidity of US foreign policy and how repeated failures could be rectified. He exposes the “duplicity of ideologues” on calls for intervention in Iraq and discusses the moral responsibility to the people of Iraq. What can be done to alleviate the suffering of the people in Iraq? “There is remarkably little discussion as to cost if you want to bomb someone, but we suddenly become acutely cost-conscious if there is a proposal to assist them.”

Dick Cheney [at 06:00] in 1993, answering a question on the first Gulf war, predicted what would happen if Iraq was invaded: “…Once you take down Saddam Hussein’s government in Iraq, then what are you going to put in its place? If you take down the central government in Iraq, you could easily see pieces of Iraq fly off…..it’s a quagmire.”

Projection of hard power by the US has not solved global problems over the last 50 years. In fact it has exacerbated problems in the Middle East. Soft power is far more effective. But it needs a change of mind-set on the part of the US. Don’t get me wrong. You still need Teddy Roosevelt’s “big stick” as a deterrent, but soft power — engineers, doctors and school teachers — are far more effective at winning people over to your world-view than B52s and unmanned drones.

June 22, 2014

The inequality debate | Thomas Piketty and Ryan Bourne IEA

The inequality debate: Thomas Piketty and Ryan Bourne, of the Institute of Economic Affairs.

http://vimeo.com/98715433

One mistake Piketty makes: he uses a marginal tax rate of 80% in the US in the 1920s and 1930s on incomes over $1 million to justify higher taxes on incomes over $1 million today. This fails to consider inflation. Adjusted for the CPI, an income of $1m in 1920 equates to an income of $12m today.

High marginal tax rates in the 1920s in the US were introduced to pay back war debt from WWI. They had the opposite effect of that intended and reduced tax collections. Treasury secretary Andrew Mellon subsequently increased tax collections by reducing maximum tax rates, with the famous quip: “73% of nothing is nothing.”

June 22, 2014

The inequality debate | Richard Epstein

Professor Richard Epstein on the inequality debate and related issues in the US.

http://vimeo.com/98678656

June 21, 2014

Financial Reform Rising | Perspectives | BillMoyers.com

Simon Johnson describes how support for financial reforms is rising despite banks fighting tooth and nail to restrict changes to the current status quo.

In the early and mid-2000s, US officials allowed large financial institutions to take on big risks – being persuaded that the people running those firms knew what they were doing. In particular, important parts of our financial system became highly leveraged, in the sense that they took out debts that were very large relative to their shareholder equity. At that time, on average, the world’s largest banks had equity worth only around two percent of their total balance sheets. As asset values went up, so did bonuses – financial executives are typically paid based on their “return on equity,” unadjusted for risk. When house prices turned down and related losses mounted, these small amounts of shareholder equity – the core of what is known as capital in the banking world – were quickly wiped out for the most highly leveraged firms.

The logical next step would have been a set of reforms to prevent big financial firms from ever becoming so highly leveraged again…..Not surprisingly, the big banks and their allies fought back against any reasonable reforms that would limit their leverage and their ability to take big risks. The Dodd-Frank reforms passed by Congress in summer 2010 were, as a result, disappointing.

Increasing bank capital requirements and limiting the types of activities that FDIC-insured banks can engage in are in everyone’s best interest. Even in the long-term interest of banks. But unfortunately bankers are focused on their short-term bonuses and not the long-term stability of the financial system.

June 20, 2014

A good week for the S&P 500 but not the ASX

Summary:

Good week for US markets.
China continues to threaten further down-side.
The ASX 200, pulled in opposite directions, is range bound for the present.
Momentum strategies require persistence.

The S&P 500 broke through 1950 and is expected to test the next resistance level at 2000*. Rising 21-day Twiggs Money Flow signals medium-term buying pressure. Reversal below 1925 is unlikely at present but would warn of a correction.

S&P 500

* Target calculation: 1900 + ( 1900 – 1800 ) = 2000

The CBOE Volatility Index (VIX) continues its downward path, indicating low risk typical of a bull market.

S&P 500 VIX

The Shanghai Composite Index rebounded Friday after a tough week and continues to test primary support at 1990/2000. Breach of support would signal a decline to 1850*. 21-Day Twiggs Money Flow oscillating above zero indicates buying support; a fall below zero would suggest selling pressure. The primary trend is expected to continue its downward path, but this is a managed descent and an abrupt fall seems unlikely.

Shanghai Composite

* Target calculation: 2000 – ( 2150 – 2000 ) = 1850

After a strong surge on Thursday the ASX 200 retreated below 5450 on Friday, suggesting another test of support at 5400. Reversal of 21-day Twiggs Money Flow below zero indicates medium-term selling pressure. Breach of support is likely and would indicate a correction to 5300. Recovery above 5500 is unlikely at present, but the long-term trend remains upward.

ASX 200

* Target calculation: 5400 + ( 5400 – 5000 ) = 5800

Resist the urge to avoid discomfort

Momentum stocks have suffered a fair degree of turbulence since April, after a strong first quarter. Investors unfortunately have to endure periods like this, when the market appears hesitant or lacks direction, in much the same the same way as travelers can expect turbulence during an air flight. It is important is to resist the urge to avoid discomfort by exiting positions. Enduring uncomfortable parts of the journey are necessary if you want to reach your intended destination. Our research on both the ASX and S&P 500 has shown that attempting to time secondary movements in the markets does not enhance but erodes performance: the average (re-)entry price is higher than the average exit price after accounting for brokerage.

A basic rule of thumb in investing is that investors need to endure higher volatility in order to achieve higher returns. If your investment time frame is long-term, it is important to focus on the end result and not be overly concerned by weekly fluctuations.